What to Know About the Sanctions on North Korea

A woman works at a textile mill in Pyongyang, North Korea.
Damir Sagolj/Reuters

World powers continue to punish North Korea with economic sanctions, but problems persist with enforcement, and it’s unclear if they’ll be enough to pressure Pyongyang back into denuclearization talks.

A woman works at a textile mill in Pyongyang, North Korea.
Damir Sagolj/Reuters

Backgrounder

Current political and economic issues succinctly explained.

Introduction

A nuclear-armed North Korea presents an existential threat to its Asian neighbors and a growing danger to the United States. With few foreign policy options, world powers have continued to rely on economic and financial sanctions to isolate the Kim regime and draw it back into denuclearization discussions, which fizzled years ago. Governments have also deployed sanctions to punish Pyongyang for cyberattacks, money laundering, and human rights violations.

While these measures have exacted a heavy toll from the North Korean economy, experts say their effectiveness has been undermined by the failure of some countries to enforce them and the willingness of some companies to flout them. Even if the sanctions chains were tightened, however, many question whether they would achieve the desired outcome.

Why does North Korea face sanctions?

The Democratic People’s Republic of Korea (DPRK) has engaged in a broad range of activities over the years that has drawn international condemnation in the form of sanctions. Chief among these are the development of nuclear weapons and ballistic missile technology.

North Korea’s leadership, under successive Kims, deems the acquisition of nuclear weapons as the sole means to guarantee its survival. Pyongyang points to U.S. military bases in the region and regular war games with South Korea and Japan as a threat to the North’s existence. The DPRK ratified the Nuclear Non-Proliferation Treaty in 1985 but withdrew in 2003, citing U.S. aggression for its decision. It carried out its first nuclear test three years later. “For Kim, nuclear weapons are a ‘treasured sword’ and a silver bullet capable of keeping domestic and international enemies at bay,” writes CFR Senior Fellow Scott Snyder in Forbes. Several rounds of bilateral and multilateral negotiations aimed at denuclearizing North Korea have failed.

What are the UN sanctions?

The fifteen-member UN Security Council has passed nine rounds of sanctions, all unanimously, against North Korea since its first nuclear test. However, the UN sanctions regime still allows for humanitarian assistance to flow into North Korea. Over time, the restrictive economic measures have expanded to include:

Cap on oil and all refined petroleum products and ban on natural gas imports

Restrictions on fishing rights

What are the EU sanctions?

The European Union has also passed supplemental economic restrictions on Pyongyang, banning admission and residency of persons who have facilitated the DPRK’s weapons program, denying North Koreans access to specialized training in the European Union, prohibiting export of luxury products ranging from pure-bred horses to ski equipment, a ban on EU investment across economic sectors, and a cap on remittances to North Korea.

What are the U.S. sanctions?

The United States has also imposed unilateral sanctions on North Korea. These restrict more economic activities and target a larger list of individuals and businesses than UN sanctions. They are primarily designed to impede Pyongyang’s development of missile and nuclear technology but are also a response to North Korea’s cyberattacks, like its 2014 breach of Sony’s computer systems, human rights violations, money laundering, and other activities. Additionally, the United States has sanctioned some non-North Korean entities for supporting its weapons programs, including Chinese banks and companies, and Russian firms and individuals. It has also fined companies, like China’s ZTE, for violating U.S. export controls with regard to North Korea and Iran.

While the number of U.S. and UN North Korea sanctions may be increasing, they focus on the wrong areas.

On several occasions, the United States has lifted sanctions on North Korea in exchange for a promise to freeze its nuclear program and dismantle parts of its facilities. However, Pyongyang has consistently reneged on its pledges.

The U.S. Congress passed its first statute [PDF] imposing sanctions on North Korea in 2016. (U.S. presidents have typically done this independently.) Among other things, the law requires the president to sanction anyone who engages in certain activities, such as the proliferation of weapons of mass destruction.

In September 2017, President Trump authorized the Treasury Department to block from the U.S. financial system any foreign business or individual that facilitates trade with North Korea. “Foreign financial institutions are now on notice that, going forward, they can choose to do business with the United States or with North Korea, but not both,” said Treasury Secretary Steven Mnuchin. Analysts say the new measures are designed to counteract sanctions-evasion tactics and aimed at Chinese banking authorities in particular.

From 1988 to 2008, the United States labeled North Korea a state sponsor of terrorism, an official designation that placed another layer of sanctions on the regime. President George W. Bush removed North Korea from the list as part of denuclearization negotiations with Pyongyang, but in November 2017 President Trump announced the return of North Korea to the list. The move followed the assassination of Kim Jong-un’s half brother in Malaysia in February of that year and the death in June of Otto Warmbier, a U.S. student who had been detained in North Korea. Others on the list are Iran, Sudan, and Syria. More U.S. sanctions are expected to follow the re-listing of North Korea.

What other countries impose supplemental sanctions on North Korea?

U.S. allies Japan and South Korea have also sanctioned North Korea beyond the measures imposed by the Security Council.

South Korea. Some South Korean leaders have taken a more conciliatory approach toward Pyongyang, attempting to expand bilateral exchanges as a path to peaceful coexistence. Some experts argue that South Korea’s policy of engagement has diluted the effects of sanctions. Seoul provided Pyongyang $7 billion between 1991 and 2015, often as food and medical assistance. Yet other leaders have kept a hard line. After North Korea attacked and sunk a South Korean naval vessel, the South imposed the so-called May 24 measures that banned North Korean ships from South Korean waters and halted North-South economic and cultural exchanges. In 2016, Seoul indefinitely suspended commercial collaboration with Pyongyang at the Kaesong industrial complex.

South Korean President Moon Jae-in campaigned with calls for improved ties with the North, but he has since supported new rounds of international sanctions and enhanced defense cooperation with the United States. Still, in September 2017, Moon approved $8 million in humanitarian aid, which Seoul said would be directed toward impoverished children and women in North Korea “apart from political issues.” South Korean customs also seized vessels in November and December suspected of supplying oil to North Korea and violating UN sanctions.

Japan. Tokyo has also restricted commercial and diplomatic exchanges with North Korea. In addition to UN measures, it imposed sanctions against North Korea starting in 2006. But it lifted some of these in 2014 to induce Pyongyang to investigate the disappearance of Japanese nationals in North Korea in the 1970s and 1980s.

Japan imposed new sanctions in February 2016 and in August and December 2017 in response to North Korean tests. Among other things, these measures freeze certain North Korean and Chinese assets, and ban the entry of North Koreans and remittances over $880.

What has been the economic impact of sanctions?

The effects of sanctions on North Korea’s economy have been mixed so far, but recent rounds could potentially have major impact. Pyongyang has grown increasingly isolated from the global market and its people cut off from economic opportunity. The September 2017 international sanctions, if enforced, could stem the flow of up to $1.3 billion to Pyongyang. The UN ban on textile exports, North Korea’s second-largest industry after coal, could cost the Kim regime around $800 million annually. Altogether, UN sanctions target 90 percent of Pyongyang’s publicly reported export products.

They are very used to suffering economically.

John Delury, Professor, Yonsei University

North Korea’s economy grew 4 percent in 2016, its fastest rate in seventeen years, but economists note that its per capita gross national income was 1.5 million won or just $1,342. By comparison, this was less than 5 percent of South Korea’s per capita income.

What are the challenges associated with sanctions?

Sanctions evasion. The biggest challenge is enforcement, which is the responsibility of individual states. National authorities may have meager financial resources to inspect shipments at ports of entry, carry out complex investigations, and perform other enforcement activities. Some individuals and entities, motivated by financial gain, are willing to do business with North Korea outside the law. Smugglers take advantage of lax inspections at ports in parts of Africa, the Middle East, and Southeast Asia. Black market activities that often go undetected ensure that shipments elude customs scrutiny and official reporting.

China, which accounts for 90 percent of North Korea’s trade, may have little or no political motivation to enforce certain sanctions. A February 2017 report [PDF] by UN experts revealed that China was serving as the lead facilitator of black market North Korean trade, and that Chinese companies were allowing North Korean banks to remain connected to the global financial system.

Weak measures. Some foreign policy experts say UN sanctions against North Korea tend to be weak because of the compromises required to garner Chinese and Russian backing. Beijing and Moscow, permanent members of the UN Security Council with veto power, fear outcomes associated with regime change in Pyongyang. “[China] wants to send a message to Kim Jong-un that his nuclear program is unacceptable and to punish bad behavior, but it does not want to trigger North Korea’s collapse or turn its neighbor into a permanent enemy,” said the International Crisis Group’s Michael Kovrig.

Emboldening Kim. Tougher sanctions could have the opposite of their intended effect and add urgency to North Korea’s nuclear advancement. The young leader has already conducted more missile and nuclear tests since he took power in 2012 than his father and grandfather combined. Kim may interpret more sanctions as a threat to the survival of the North Korean regime, and could motivate him to take more belligerent actions, like moving on South Korean territory or targeting U.S. territory in Guam.

Futile pursuit. Some foreign policy experts feel that sanctions alone will have little effect in deterring Pyongyang from advancing its nuclear weapons program. “No amount of sanctions is going to bring about the goal of denuclearizing or demissiling North Korea,” says CFR President Richard N. Haass. Indeed, North Korea has vowed to maintain its arsenal at all costs.

Human costs. Sanctions are often felt most by ordinary families, not the power elites who are the intended targets. “When the economy overall hurts they don’t cut the military first, they cut it last. They are very used to suffering economically and the regime is very good at it,” said John Delury, a professor at Seoul’s Yonsei University. Sanctions and extended periods of drought have left many of North Korea’s twenty-five million people malnourished and impoverished.

What are some policy alternatives?

Many policy analysts describe the North Korean nuclear threat as a policy challenge with only poor options, in that none guarantee the denuclearization of North Korea and some, if unsuccessful, could make matters worse.

Accepting North Korea as a nuclear power. Some experts suggest world powers, including the United States, should consider some form of de facto acquiescence to a nuclear North Korea. Under such an agreement, Pyongyang would commit to declaring its capabilities, turning over a small number of its weapons, and granting IAEA officials entry to facilities. Pyongyang could then maintain some nuclear development and gain recognition of its weapons abilities in exchange for disarming and dismantling portions of its programs. Other experts, like the Brookings Institution’s Evans J.R. Revere, caution against acquiescence because the regime’s nuclear threat would remain in place, and the country might then act more aggressively toward South Korea and Japan. Acquiescence could also set a bad precedent, as North Korea would then be the only former non-nuclear signatory of the NPT to leave and develop a weapons program, according to CFR’s Scott A. Snyder.

Military options. The Trump administration has stated that “all options are on the table,” including military options. However, many experts are quick to dismiss preemptive strikes on North Korea’s nuclear, missile, and weapons cache sites as a credible alternative. There is no guarantee that U.S. military strikes would destroy all of the country’s facilities, as Pyongyang likely has covert, underground locations. A second major risk is that most military action taken by the United States would almost guarantee a devastating retaliation by the regime on South Korea. Some defense experts have floated the option of a full naval blockade, though enforcing it would require significant political will and coordination across U.S. and allied forces.

Are more sanctions the answer?

Disagreements remain on how best to move forward. Some, like Anthony Ruggiero of the Foundation for Defense of Democracies, argue that there is room for far tougher sanctions against North Korea and those who do its bidding. “While the number of U.S. and UN North Korea sanctions may be increasing, they focus on the wrong areas [PDF],” Ruggiero said in U.S. congressional testimony in July 2017. They call for harsher designations on more non-North Korean entities, particularly Chinese entities.

Others suggest that it will take years for sanctions to have a meaningful impact and that any approach to North Korea will inevitably have a long-term trajectory characterized by only incremental increases in pressure. Experts like Snyder say that for sanctions to work, they must be implemented in conjunction with other measures such as diplomacy and assurances by Washington to U.S. allies in the region. Meanwhile, enforcement can be improved with enhanced training for authorities inspecting ships in international ports and legal interpretation of UN resolutions. By filling the cracks in sanctions enforcement, North Korea may be forced to change how it allocates its budget to bolster the regime domestically. “The only remaining hope for denuclearizing North Korea peacefully lies in convincing it that it must disarm and reform or perish,” write Joshua Stanton, Sung-yoon Lee, and Bruce Klingner in Foreign Affairs.

The European Commission provides a regularly updated list [PDF] of the EU’s restrictive measures against North Korea.

Stephan Haggard and Marcus Noland explore the role of economic incentives in negotiating on North Korea’s nuclear program in their book, Hard Targets: Sanctions, Inducements, and the Case of North Korea.

Japan’s United States–imposed postwar constitution renounced the use of offensive military force, but, Sheila A. Smith shows, a nuclear North Korea and an increasingly assertive China have the Japanese rethinking that commitment—and their reliance on U.S. security.

Sessions were held on denuclearizing North Korea, addressing global health among the world's aging population, managing energy and the environment in Asia, and the intersection of technology and nationalism.